Politics of Poverty

IMF’s Lagarde: Ghana program will improve budget transparency

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Eager to engage in monitoring it, Ghanaians ask for details to become public soon

Omar Ortez is the Senior Policy Advisor on Active Citizenship at Oxfam US. You can follow him on Twitter @omarortez1.

Over the last three years Ghana’s economy has suffered from increased debt, high inflation and a falling national currency. On April 3 and after months of negotiations between IMF staff and Ghanaian officials, the IMF board approved  a US$ 918 million program with Ghana that will last three-years. As recently explained by IMF’s Managing Director, Christine Lagarde, the program stands on three pillars: “First , a strong fiscal adjustment to restore debt sustainability (debt is now 67.5 per cent of GDP) …This will be done by taking measures to collect more revenue and restrain the wage bill which more than doubled in the last five years. Second, structural reforms to strengthen public finances and fiscal discipline by improving budget transparency, cleaning up and controlling the payroll and restructuring the civil service. Third, strengthening the monetary policy framework to help reduce the high inflation which, as always, hurts the poor more, and preserving financial sector stability.”

While they recognize the need for the program, Ghanaians are certainly concerned about the potential negative impacts some of the measures could have on the provision of public services and jobs; and want to remain engaged with both the government and IMF to suggest ways of mitigating them. During 2015, the program’s first year, growth is projected to go down to 3.5 per cent from 4.1 per cent in 2014. If things go well growth should recover to 6.4 and 9.2 by 2016 and 2017 respectively. However, public statements by IMF officials (see here and here) are assuring that the program will strengthen budget transparency, improve fiscal responsibility and has commitments towards social protection. For these reasons, Ghanaians are cautiously hopeful.

As always, though, the devil (or the charm!) is in the details. Ghanaian CSOs are ready to help monitor the program but the agreement has yet to be made public. IMANI Center for Policy and Education, an Oxfam partner and founding member of the CSO Platform, has officially requested a copy of the agreement to the Government of Ghana (GOG). “They [the GOG] have promised to make the agreement available next week. So far we haven’t seen the extent to which CSO Platform’s detailed policy recommendations on citizen’s right to information, fiscal responsibility, budget transparency and accountability and protecting pro-poor spending have been incorporated into the final agreement,” said Joe Winful, Chairman of the CSO Platform.

Specifically on the topic of budget transparency, it shouldn’t be too difficult for active citizens in Ghana, the national government and the IMF to agree on the core measures that require focused implementation and intense monitoring efforts. Consensus already exists across key initiatives such as (1) the GOG’s own Open Government Partnership (OGP) action plan (evaluated here), a second phase of which is soon to be launched; (2) Ghana’s 2012 Open Budget Index (OBI) score; and  (3) Ghana’s 2013 Public Expenditure & Financial Accountability (PEFA) Performance Review; on three relevant measures to improve budget transparency in Ghana. What is now needed to push these measures through is for all key stakeholders  –particularly the Government of Ghana –  to dedicate appropriate levels of resources (shouldn’t  the budget transparency agenda become priority public spending?) as well as parliamentary and executive leadership (elevate it to a cabinet level priority in president John Dramani Mahama’s administration), and resolve. Measures are:

  1. Fast tracking the Right to Information (RTI) bill in 2015. In order to enhance citizen participation and oversight of the budget and public expenditures –a pending deliverable of Ghana’s OGP action plan, and a strong OBI and PEFA recommendation.
  2. Full rollout of GIFMIS (the public accounting system) through the entire public sector. Will enable the GOG to better link the budget statement to specific policy goals (such as pro-poor or strategic development spending); to increase the comprehensiveness of the Enacted Budget Report by providing program-level details; and to better document executive actions taken to address Audit Report recommendations (in PFA and OBI recommendations, and OGP plan).
  3. Improving parliamentarian technical and independent budget oversight. In order to overcome recurring oversight errors and issues identified by the Public Accounts Committee (PAC) and other select committees, the presentation of a pre-budget statement should be coupled with a pre-budget policy debate (and public hearings) before budget approval (PEFA, OBI); parliament should be provided with a technical office that helps them analyze budget proposals and executions (PEFA); and address the backlog of audits reports to be scrutinized (PEFA).

Lack of fiscal discipline enabled by low levels of accountability and transparency in the budget are intimately connected to the underlying causes of Ghana’s current fiscal crisis and could affect IMF’s program success. Here is Christine Lagarde once again “…the discovery of oil might have given the illusion that the public finance imbalances would get resolved easily. This may have weakened the sense of fiscal discipline.” Ghana’s fiscal crunch began when it overshot a budget deficit target for the 2012 election year because of wage increases for civil servants and other significant off-budget expenditures. Interestingly enough, that same year Ghana’s Open Budget Index score went down from 54 (in 2010) to 50.

With elections due next year, some credit rating agencies have remained concerned that it will be difficult for the GOG to constrain spending. Last March, Moody’s Investors Service downgraded Ghana’s sovereign rating and put the country on a negative outlook. An IMF program is seen as key to restoring investor confidence. It should yield budget support for donors but, more importantly, it will make it easier for the country to gain access to domestic and international debt markets. A $1 billion Eurobond sale is scheduled for June; a step that would require careful contingency planning for currency rate volatility according to IMF’s own World Economic Outlook (WEO) recently published. The Government of Ghana also appears to be talking with Bank of America Corp. to potentially borrow up to $1 billion to refinance its domestic and international debt before the bond sale.

Meanwhile, Ghanaians remain eager to engage in monitoring the IMF program implementation, and ask that details become public soon. After all, the devil (or the charm!) is in the details.

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